Youth leadership and community-project grants approved

Plain-English summary

A private foundation proposed a leadership program for selected public high school juniors, their educators, and a smaller group of students and an educator from an overseas partner. The program would pay travel and attendance costs for a week of seminars, workshops, guest meetings, and outdoor activities at a public charity's annual event. Student-educator pairs would then design community projects, receive mentoring and webinars, and could apply for grants paid to their schools or affiliated public charities, with continuation funding available for up to three years. Selection used school need, student leadership, academics, diversity, volunteer review, and interviews. The IRS approved the procedures under section 4945(g)(3), so grants made as proposed would not be taxable expenditures.

Ruling snapshot

• Question: Did the foundation's youth leadership, travel, and community-project grant procedures satisfy the advance-approval rules?
• Outcome: approved
• Key authorities: IRC § 4945(g)(3); Treas. Reg. § 53.4945-4(c)(1)

Full text (IRS public release)

Transcriber's note: this document is a scan. Obvious OCR errors in bullet symbols and a few misread or run-together words were corrected by comparison with all five page images. The wording is otherwise reproduced verbatim.

Internal Revenue Service Department of the Treasury
P.O. Box 2508
Cincinnati, OH 45201

Number: 201733018 Employer Identification Number:

Release Date: 8/18/2017
Contact person - ID number:

Contact telephone number:
Date: May 23, 2017

LEGEND: UIL:
C= event 4945.04-04
D= event 2

E= award

F= continent

m dollars= award amount

n = number

p = number

q = percentage

r = number

X= program

Y= organization

Z= organization

Dear

You asked for advance approval of your educational grant procedures under Internal
Revenue Code section 4945(g)(3). This approval is required because you are a private
foundation that is exempt from federal income tax.

Our determination

We approved your procedures for awarding educational grants. Based on the information
you submitted, and assuming you will conduct your program as proposed, we determined
that your procedures for awarding educational grants meet the requirements of Code
section 4945(g)(3). As a result, expenditures you make under these procedures won't be
taxable.

Description of your request

You will operate an educational grant program called X. Your goal is to inspire and
challenge recipients to act on their passions and collaborate to address true community
needs by offering development opportunities, support, and leadership resources.

X has been carried out in conjunction with Y (a public charity) for the past n years. Due
to your more active participation in X, you are requesting this advance approval. To
implement X, you will select n of the top public high school juniors and educators from the


student’s respective school, and p students and one educator from Z, to attend C each
year. Z is an organization that looks to develop and connect future leaders in F working
together to address challenges and achieve social impact. For its participation in X, Z will
oversee the student selection process and recommend up to ten finalists. Z will solicit
applications from its current first year class and vet top candidates from which you will
make the final selection.

C is a yearly event on the campus of Y and lasts for one week. X will cover all expenses
including airfare, transportation, lodging, meals and fees to attend C. The recipients will
be on the campus of Y attending the sessions of X during C. The recipients will also be
able to attend events and programs of interest to them when not attending their X
sessions.

X consists of the following while at C:

• Daily private meeting with presenters or notable guests of C and facilitated by you
and Y

• Outdoor excursions as an introduction to Y’s environs and philosophy

• Moderated, text-based seminar with Y’s moderator(s)

• Daily workshops on Y’s campus to facilitate planning of D and leadership
development

• Potential integration with other youth or educator-focused groups attending C.

After attending C, each recipient will return home with inspiration, tools and resources to
begin their own community change projects. Recipients will work in a pair with one
student to one educator and will create ideas that will respond to issues of relevance in
their communities. To support this effort, there will be webinars facilitated by you and they
can apply to you for E, grant funds of m dollars for their school to design and implement
their idea(s). E will be made to the recipient's school or to a public charity associated with
the school for implementation. E is a core component of X and your staff will be
responsible for administering E and tracking the ideas. You will also provide ongoing
mentorship and advice on the development and implementation of their ideas. After the
ideas have been implemented by each school or affiliated non-profit, you will obtain
information about their ideas and the success of each program. The school can apply for
funding to continue the idea for three consecutive years.

To be eligible for X, applicants must attend a school that meets the following criteria:

• Public high school including charter and magnet schools
• At least q of students are eligible for free/reduced price meals at the student’s high
school

• In an effort to provide the opportunity to a broader number of schools, priority will
be given to schools that have not had a recipient in the previous two years

In addition, an applicant must meet the following criteria:

Letter 4779 (10-2012)
Catalog Number 58222Y


• Junior status during the academic year in which they are applying

• Legal U.S citizen, permanent resident, or have received DACA status (this does
not apply to those selected from Z as they are from F.)

• Demonstration of leadership in one’s school and community
• Have taken at least one of these tests: PSAT, SAT, ACT, or ACT Aspire

• Beenrolled in, or have taken, one or more Advanced Placement (AP) classes,
International Baccalaureate (IB classes), or college level courses

• Availability to participate in all program dates

X will be publicized through your website, Y’s website, social media, and direct mailings
or outreach to high school administrators or counselors.

You seek a collective group of students to represent ethnic, socioeconomic, gender, and
geographic diversity and the recipients will be selected on an objective and non-
discriminatory basis.

Your selection committee will be comprised of volunteers who are involved in education,
business, and philanthropic sectors and may include at least one Y Executive, Trustee, or
Society of Fellows member. The size of the committee will typically consist of 12-15
members but can vary based on the size of the applicant pool.

The committee will be responsible for recommending r student finalists. There will be two
rounds of application reviews: an initial round from which r finalists will be selected, and a
second round to identify n recipients and two alternates. The applications of all r finalists
will be given a final review by all selection committee members who will provide
comments and recommendations to you in regard to the final selection. You will conduct
phone interviews to solidify the selection of the n recipients and the final selection will be
made by you.

The educators are nominated by the student in their application. After the recipients and
alternates are selected, you will contact the nominated educators for a phone interview to
reinforce program goals, clarify their role, and address any questions about participation.
You may ask for an additional educator recommendation.

Basis for our determination

The law imposes certain excise taxes on the taxable expenditures of private foundations
(Code section 4945). A taxable expenditure is any amount a private foundation pays as a
grant to an individual for travel, study, or other similar purposes. However, a grant that
meets all of the following requirements of Code section 4945(g) is not a taxable
expenditure.

• The foundation awards the grant on an objective and nondiscriminatory basis.
• The IRS approves in advance the procedure for awarding the grant.
• The grant is:

Letter 4779 (10-2012)
Catalog Number 58222Y


4

- A scholarship or fellowship subject to section 117(a) and is to be used for
study at an educational organization described in section 170(b)(1)(A)(ii); or

- A prize or award subject to the provisions of section 74(b), if the recipient of
the prize or award is selected from the general public; or

- To achieve a specific objective; produce a report or similar product; or
improve or enhance a literary, artistic, musical, scientific, teaching, or other
similar skill or talent of the recipient.

To receive approval of its educational grant procedures, Treasury Regulations section
53.4945-4(c)(1) requires that a private foundation show:

• The grant procedure includes an objective and nondiscriminatory selection
process.

• The grant procedure results in the recipients performing the activities the grants
were intended to finance.

• The foundation plans to obtain reports to determine whether the recipients have
performed the activities that the grants were intended to finance.

Other conditions that apply to this determination
• This determination covers only the grant program described above. This approval
will apply to succeeding grant/loan programs only if their standards and
procedures don’t differ significantly from those described in your original request.

• This determination applies only to you. It may not be cited as precedent.

• You cannot rely on the conclusions in this letter if the facts you provided have
changed substantially. You must report any significant changes in your program to
the Cincinnati Office of Exempt Organizations at:

Internal Revenue Service

Exempt Organizations Determinations
P.O. Box 2508

Cincinnati, OH 45201

• You cannot make grants to your creators, officers, directors, trustees, foundation
managers, or members of selection committees or their relatives.

• All funds distributed to individuals must be made on a charitable basis and must
further the purposes of your organization. You cannot award grants for a purpose
that is inconsistent with Code section 170(c)(2)(B).

• You should keep adequate records and case histories so that you can substantiate
your grant distributions with the IRS if necessary.

We've sent a copy of this letter to your representative as indicated in your power of
attorney.

Letter 4779 (10-2012)
Catalog Number 58222Y


Please keep a copy of this letter in your records.
If you have any questions, please contact the person listed at the top of this letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4779 (10-2012)
Catalog Number 58222Y